Friday, July 21, 2006

The Elephant in the Corner

Gary Hanman, former president and CEO of Dairy Farmers of America and perhaps the most powerful man in the dairy business, sat virtually unnoticed in the back corner of the Senate Agricultural Committee hearing room this Thursday. Well, unnoticed until Chairman Saxby Chambliss pointed him out by name as his “long-time personal friend.” It struck me afterwards that the presence of giant dairy cooperatives and their powerful impact on the dairy industry went similarly unnoticed and unmentioned throughout the two hour hearing, while the USDA, milk producers and processors testified on problems facing dairy farmers in preparation for the 2007 Farm Bill.

The USDA testimony led off with a history of the changing structure of the U.S. dairy industry. Given the enormous effects of market consolidation and vertical integration by cooperatives like DFA, it would make sense to include this economic information here, right? If only as a historical fact? Instead the USDA cloaked this industry change and the resulting loss of small to medium-sized dairy farms in euphemisms like “increased economies of size.” The number of U.S. dairy farms dropped 70 percent between 1980 and 2003. The USDA chalks up this loss to “advances in technology and improvements in productivity.” The government’s Get-Big-Or-Get-Out chorus may be singing different lyrics, but the tune is all too familiar.

A significant focus of the hearing was on the Milk Income Loss Contract (MILC) program, and the impact that its payments have had on keeping small-medium operations in the marketplace. The USDA’s analysis of the program boiled down to this: don’t judge the program by the exit of small to medium sized farms from the marketplace. They will continue to leave and there’s nothing that the MILC program or any other USDA policy will do to stop it. In fact, according to the Department’s chief economist, “federal dairy policy will likely have only minor effects on these structural changes.” But they don’t explain why that has to be the case.

It’s not that federal policy can’t have an effect on those structural changes that force out smaller farmers. It’s not a given that the federal government has to stand by while agribusiness entities consolidate and consume larger and larger shares of the dairy market, destroying competition. But under this administration, policy won’t have an effect unless Congress awakes from its long slumber and demands enforcement of anti-trust regulations that USDA and the Department of Justice have failed to use. Otherwise, we will continue to wonder why programs like MILC “aren’t working” while ignoring the structural impacts of market consolidation, the elephant in the corner. As the Committee prepares for another hearing on dairy this fall, we should press for these issues to be addressed head-on.